Corinthian Shares Continue Down

Shares of Corinthian Colleges Inc. were down about 20% to a market value of approximately $77 million in afternoon trading Wednesday on word that it’s renegotiating loan covenants with lenders and has hired Barclays PLC to “explore all the options that will increase shareholder value.”

The dip began Tuesday when the Santa Ana-based for-profit school operator reported a loss of $79.6 million, or $.91 per share, compared with a $1 million loss it posted in third quarter of fiscal 2013. Earnings per share from continuing operations were $0.03, below $0.05 average analysts’ estimate.

Corinthian reported $349.8 million in revenue for the quarter, a decrease of 11.7% compared with $395.9 million for the same period a year earlier.

Enrollment was down 11,799 students for a total of 86,297. New student enrollments totaled 22,853, a 13.1% decrease.

The company said it expects new student enrollment to be down 16% to18% in the fourth quarter, and revenue to range from $340 million to $350 million.

The school, expecting a “three-year cumulative loss at June 30,” also reported $76.5 million in deferred tax asset valuation allowance, Bob Owen, Corinthian’s CFO, said during Tuesday’s earnings call.

This puts it in “non-compliance with certain of its bank debt covenants, but we are currently seeking a waiver from our bank syndicate,” Owen said, “although there can be no assurance, we expect to receive the waiver before we file our third quarter 10-Q later this month.”

Owen said the deferred tax asset valuation allowance may have negative impact on Corinthians’ annual composite score—a reporting requirement by the U.S. Department of Education which reflects the overall financial health of an institution on a scale from negative 1.0 to positive 3.0

“If we do not achieve a 1.5 composite score, it will constitute an event of default under our credit agreement,” he said. “We are working on amendments to the credit facility, which we expect to the file with the SEC prior to reporting our fourth quarter results.”